Accounting Standards for Business Enterprises

Accounting Standards for Business Enterprises

Order of the Ministry of Finance [1992] No. 5

November 30, 1992

The Accounting Standards for Business Enterprises were approved by the State Council on November 16, 1992 and are hereby issued with effect as of July 1, 1993.

Minister: Liu ZhongLi

Attached: Accounting Standards for Business Enterprises

Chapter I General Provisions
　
Article 1 In accordance with "The Accounting Law of the People's Republic of China, " these Criteria are formulated to meet the needs of developing a socialist rnarket economy in our country, to unify the accounting standards and to ensure the quality of accounting information.
　
Article 2 These Criteria shall be applicable to all enterprises established within the territory of the People's Republic of China.
Chinese invested enterprises eslablished outside the territory of the People's Republic of China (hereinafier referred to as enterprises abroad) shall be required to prepare and disclose their financial reports to the relevant domestic departments in accordance with these Criteria.
　
Article 3 Accounting systems of enterprises shall be formulated in compliance with these Criteria.
　
Article 4 An enterprise shall accurately account for all its business transactions actually taken place, and record in reliable reports all the business activities of the enterprises itself.
　
Article 9 Accounting records and financial reports shall be formulated in the Chinese language. Minority languages may be used concurrently with the Chinese language by enterprises in autonomous areas of minority nationalities. And a foreign language may also be used concurrently by enterprises with foreign investment or foreign enterprises.

Chapter II General Principles
　
Article 10 The accounting records and financial reports shall be based on business transactions actually taken place, and truthfully reflect the financial position and operating results of an enterprise.
　
Article 11 Accounting information shall be designed to meet the requirements of national macro-economic control, to satisfy the needs of all concerned external users to understand an enterprise''s financial position and operating results, as well as the needs of enterprises to strengthen internal management and administration.
　
Article 12 Accounting records and financial reports shall be prepared according to stipulated accounting methods, and accounting data shall be comparable and convenient to be analyzed.
　
Article 13 Accounting methods used shall be consistent from one period to the other and shall not be arbitrarily changed. Where changes are absolutely necessary. the changes and reasons therefor and their impact on an enterprise''s financial position and operating results, shall be indicated in the financial statements.
　
Article 14 Accounting records and financial reports shall be prepared in a timely manner.
　
Article 15 Accounting records and financial statements shall be prepared in a clear, concise manner to facilitate understanding, examination and use.
　
Article 16 The accrual basis of accounting shall be adopted in accounting records and financial reports.
　
Article 17 Revenue shall be matched with related costs and expenses in accounting.
　
Article 18 Principle of prudence shall be followed, and possible loss and expense shall be reasonably determined.
　
Article 19 The values of all assets are to be recorded at historical costs at the time of acquisition. The amount recorded in books of account shall not be adjusted even though a fluctuation in their value may occur, except otherwise stipulated by the State.
　
Article 20 A clear distinction shall be reasonably drawn between revenue expenditures and capital expenditures.
Expenditure shall be regarded as revenue expenditure where the benefit to the enterprise is only related to the current fiscal year; and as capital expenditure where the benefils to the enterprise last for several fiscal years.
　
Article 21 Financial statements shall reflect comprehensively the financial position and operating results of an enterprise. Transactions relating to major economic activities are to be identified and separately reported in financial statements.

Chapter III Assets
　
Article 22 Assets are economic resources, which are measurable by money value, and which are owned or controlled by an enterprise, including all property, claims, and other rights.
　
Article 23 Assets shall normally be divided into current assets, long-term investments, fixed assets, intangible assets, deferred assets and other assets.
　
Article 24 Current assets refer to those assets which will be realized or consumed within one year or within an operating cycle longer than a year, including cash, cash deposits, short-term investments, receivables, prepayments, and inventories, etc.
　
Article 25 Cash and all kinds of deposits shall he accounted for according to the actual amount of receipt and payment.
　
Article 26 Short-term investments refer to various marketable securities, which can be realized at any time and will be held less than a year, as well as other investment with a life of no longer than a year.
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